Names at Lloyd's now owe £1.6bn
Monday 01 May 1995
Lloyd's auditor, the accountants Ernst & Young, warns that things will get worse before August - when the insurance market must submit its annual solvency return to the Department of Trade and Industry (DTI)
If the figures show that investors' total funds are insufficient to cover losses, the DTI may be forced to close Lloyd's down.
The solvency shortfall is caused by up to 9,000 investors - Lloyd's names - who either cannot or will not meet their share of the £8bn lost by the market over the past four years.
The accounts show that insolvent investors have current debts of £1.06bn. Against this figure, Lloyd's had liquid assets of £738m at the end of last year, a shortfall of £319m.
In addition to the current debts, a further £558m has been paid out from the market's central fund, bringing the members' total debts to £1.6bn.
The figures came only hours after the news that Sturge, one of the market's foremost managing agencies, has been unable to raise a bank loan to cover the losses on one of the syndicates of names which it operates.
The auditor's report on Lloyd's central fund accounts runs to two and half pages of closely printed type. This compares with a typical audit report which consists of half a dozen standard sentences.
The auditors say that Lloyd's finances face fundamental uncertainty. "The underwriting results to be included in the solvency test will again have deteriorated and the entire central fund will again be included in the assets available to meet the solvency requirements."
Analysts predict that Lloyd's will reveal new £1.5bn losses when it announces its figures in mid-May.
In the chairman's statement accompanying the report and accounts, David Rowland admits that Lloyd's is under strain, but insists that it remains a going concern.
Lloyd's central fund has paid out £773m over the past three years - including the payout of £558m to meet defaulting members' debts. Over that time, it has recovered less than £30m from the defaulters.
A further £460m may also have to be charged to the fund - depending on the outcome of legal actions against companies that re-insured some Lloyd's syndicates that were closed down in the early Eighties.
To replenish the fund, Lloyd's is expected to raise a levy on members in the summer. The last time this was done, in 1992, some £518m was collected. This time, the target would be to raise about £600m.
Christopher Stockwell, chairman of the Lloyd's Names Associations Working Party, said that the losses would be significantly larger than those shown in the accounts.
"There is no provision for claims against the central fund which have been started but have yet to be approved by Lloyd's council. I would expect up to £500m of such claims to be in the pipeline," he said.
9 Chatset, the independent Lloyd's analysts, last week warned that the market would need bailing out by the Bank of England if it is to pay all claims in the next 12 months - but this was denied by Lloyd's.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Germany sees 'visible rise' in support for far-right extremism in response to perceived 'Islamisation' of the West
iJobs Money & Business
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...
£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...